Professor Bob Gregory eats complex economic theory for breakfast. But the eminent ANU economist was stumped a few years back when a person came to him with a real-world economic problem.

The woman had bought a house in a more affordable regional area. As happens, she had then started a relationship. She sold her house, managing to bank several thousand towards the couple's shared future. But it wasn't to be. The pair broke up and the woman found herself without the house and without an income.

Unemployed, she applied for Newstart, only to be told that with money in the bank, she was not eligible. If that same wealth had remained as equity in her house, she would have instantly qualified for Newstart, Gregory says.

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His point is that eligibility rules around such emergency aid as Newstart, are actually very tight, despite the parsimony of the payments, and many people rendered jobless simply do not qualify. It is one reason why it is difficult to predict the budget impact of extra dole payments arising from the spate of job losses announced in recent months.

Obviously the state should not be called on to subsidise people with their own means. But as with other areas of the social safety net, the game is skewed in favour of the propertied.

The treatment of assets, be they cash, property, or superannuation, is a critical factor in the fairness and the cost effectiveness of programs within the social safety net.

Just this week another example came to prominence when debate erupted over the Commonwealth Seniors Health Card. The card gives older Australians access to cheaper prescription medicines, government-funded medical services, and other government concessions.

Its income test says you cannot earn more than $50,000 a year. But superannuation is not counted, allowing some with $100K-plus super incomes to receive the benefit.

It is understood the Commission of Audit wants to rein in the burgeoning cost of this card, an initiative of the Howard government to help self-funded retirees who were asset rich but nonetheless struggled with day to day costs.

Asked about that possibility this week, Tony Abbott merely restated his commitment to keep election promises. Which in this case went to indexing the $50K income cut-off allowing more people to qualify, not fewer.

It is just one of the many straitjackets the government has made for itself as it struggles to reconcile tough rhetoric about spending cuts, generally, against a raft of exceptions already named including education, health and medical research, and defence.

Even within current constraints there are solutions but they presume a level of political courage which has been sadly absent on both sides of the fence for years.

Deloitte Access Economics director, Chris Richardson has advocated removing the so-called "perverse incentive" which encourages the jobless to seek the Disability Support Pension, because it is more generous. (At present, the dole is pegged to inflation - currently around 2.5 per cent - whereas the rate of the disability support payment is growing much faster because it is pegged to wages.) Modelling suggests the disability support payment will be worth twice the value of Newstart within 15 years unless corrective action is taken.

Richardson wants Newstart topped up on a one-off basis, and then to have it, along with the disability support payment and the age pension, indexed uniformly thereafter using a formula of inflation plus 0.5 per cent. This way, costs would be contained - by as much as $50 billion over the next two decades.

In refreshingly frank terms, the former Treasury boss Ken Henry this week explained that Commonwealth revenue had been allowed to decline by 3 per cent as a proportion of GDP over the last decade as the political temptation to cut taxes and increase spending through middle-class welfare had been indulged.

This structural deficit had been masked at the time by the rivers of gold from the resources boom, but those days are gone.

But don't blame the jobless. After all, Newstart is easily the smallest of the payments mentioned above and is predicted to remain more-or-less constant, going from $9.5 billion this year to $9.8 billion in 2016-17.

It is dwarfed by the disability support payment at $15.5 billion - a figure expected to rise by 15 per cent over the next four years. It's the same with the age pension, which is at $40 billion this year, will blow out by a whopping 23 per cent over the same period to just under $50 billion.

In other words, it will take a lot more than denying the dole to a few genuinely needy people, to turn this situation around.

Mark Kenny is The Age's chief political correspondent.

184 comments

Abbott needs the unemployment benefit to remain miserable so as to punish the unemployed. To them it is not a welfare matter, but a disciplinary matter.

Commenter

Tin

Date and time

March 14, 2014, 4:21AM

Seems that way, doesn't it Tin? The notion is that everyone is totally equal and if they can't keep up with the rest of the community (for whatever reason), then they should be castigated for it. Yet what shows up their deceitful tactic is the application of the same theory to our children - within education.

The left are really scraping the bottom of the barrel in their constant crusade against this financially-responsible government.

Commenter

Simon

Location

Melbourne

Date and time

March 14, 2014, 6:03AM

Are we supposed to take that comment seriously?

Commenter

Peter@Brisneyland

Date and time

March 14, 2014, 6:05AM

Abbott also has no problems putting people dole.

Commenter

Bazza

Date and time

March 14, 2014, 6:15AM

Simon show me where the million jobs are, 840,000 unemployed and rising available jobs 126,000, being responsible please, what are these people supposed to survive on, all you ever hear from the lieberals is get an education to get a better job, all good, but they can't tell you where the jobs are because there aren't any, stop blaming the unemployed, if there were jobs available most would jump at the chance, but there are no jobs

Commenter

lost2

Date and time

March 14, 2014, 6:34AM

You are spot on and if you calculate the superannuation payment by employers over a 50 year period the superannuation provides a pension far exceeding that of the O.A.P.

Commenter

Pen of hrba

Date and time

March 14, 2014, 6:58AM

On average, superannuation lasts about 12 years. Then you will depend on the Age Pension with relatively well off people chipping you about it, even though you might have paid taxes at the highest marginal rates all your life, and brought up and educated kids who are productive and assets to society. My comment is:'This is MY world, and I have not finished with it yet ! '

Commenter

adam

Location

yarrawonga

Date and time

March 14, 2014, 7:21AM

One of the issues with Super is that the tax concessions cost several times the savings they provide by way of pension savings. Super has now been around for over 20 years, costs more than $25billion per year, and yet around 80% of pensioners receive a pension (50% receive a full pension).

Considering how many people would not have been elegible for the pension in any event, this indicates little if any pension cost has been offset up to now.

This will change to some extent over the next 20 years, but the cost of super will rise exponentially as well. It will never pay for itself unless concessions are strictly capped.

Commenter

Bob

Location

Sydney

Date and time

March 14, 2014, 9:32AM

It needs to be low enough to be uncomfortable, people shouldn't want to accept it, a payment of last resort.

Unfortunately, there is nothing to actually help people get off it. Job networks are a rort, staff are unhelpful (by edict). It should be about retraining and redeployment into the workforce. Skill/situation/jobs in need (i.e. those things on 457s) check, log you into a course, fire you back to the workforce. We do enough adult education that this should be simple, but it just doesn't happen.

People on the dole are vilified. Bludgers, not someone who has fallen on hard times trying to get up. And rather than giving them a helping hand to stand on their own two feet they are shoved back into the mire.

Abbott does seem to believe its a punishment, a purgatory, when unionists will go when he destroys their jobs. This crusade against unions will not end well for the Australian populace.

13 Mar
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